Canada: Is The Canada-EU CETA Dead? An Update

Last Updated: October 25 2016
Article by Cyndee Todgham Cherniak

As a trade lawyer, I remain optimistic that the Canada-EU Comprehensive Economic and Trade Agreement ("CETA") will be signed. I am not ready to issue a "call of death"; but I am closer to that call than I was last week. The problem is that Canada is finished negotiations of the CETA and will not reopen the agreement for further modifications and concessions. Wallonia has indicated it will oppose the CETA unless the investment chapter is reopened and rewritten to remove the investor-state dispute settlement mechanism. Further, Belgium has indicated that three jurisdictions oppose the CETA. This means that the CETA deal is in critical condition.

However, Donald Tusk, President of the European Council has tweeted:

"Together with PM @JustinTrudeau, we think Thursday's summit still possible. We encourage all parties to find a solution. There's yet time."

@CanadianPM tweeted:

"PM Trudeau and @eucopresident agree that the EU and its member states should continue to work towards the Summit on Thursday. #CETA"

This may mean that heroic measures are being taken to revive the dying CETA. Prime Minister Trudeau's plane is ready to fly to Europe and give CETA CPR.

Timeline

Before I discuss about where we are and where we are going, we need to review where we came from:

  • In June 2007, Canada and the European Commission agreed to conduct a joint study examining the costs and benefits of pursuing a closer economic partnership.
  • In October 2008, Canada and the EU issued a joint study entitled "Assessing the Costs and Benefits of a Closer EU-Canada Economic Partnership".
  • In March 2009, the joint report was finalized.
  • In May 2009, Prime Minister Stephen Harper, EU President Mirek Topolánek and European Commission President José Manuel Barroso, announced the launch of CETA negotiations.
  • In October 2009, Canada and the EU engaged in the first round of CETA negotiations.
  • By October 2011, nine formal rounds of CETA negotiations are completed.
  • In October 2013, Prime Minister Harper and José Manuel Barroso announced that Canada and the EU had reached an agreement in principle.
  • In August 2014, Canada and the EU announced that they had reached a complete text of the Canada-EU CETA, marking the conclusion of negotiations. Canada and the EU commenced the legal review and translation of the text into the other 22 EU treaty languages.
  • In September 2014, Canada and the EU released the text of the CETA.
  • In February 20916, a joint statement is issued by Canada and the EU after CETA is revised to address concerns within the EU.
  • In July 2016, the revised text of CETA is released.
  • In October 2016, Canada meets with counterparts in the EU to address additional concerns.
  • On October 13, 2016, a German Court dismisses a legal case brought to block CETA.
  • On October 14, 2016, Wallonia's Parliament indicates they will veto CETA.
  • Canada and the EU work on a joint declaration to clarify the CETA and reinforce some important points in an attempt to alleviate the concerns of Wallonia.
  • On October 21, 2016, the negotiations break-down due to demands by Wallonia.
  • On October 22, 2016, Martin Schultz has meetings with Canada and Wallonia and announces that more time is needed.
  • On October 24, 2016, Charles Michel, President of Belgium said that Wallonia and two other jurisdictions will not sign off. Mr. Paul Magnette said that Wallonia will not be pressured by the European Commission to sign on for CETA.

Where are we now?

On October 21, 2016, Mr. Paul Magnette attempted to extract more concessions out of Canada because he believed that he had Canada backed in a corner. At this point. Canada's Trade Minister Chrystia Freedland walked out of the negotiations (as she should). She issued the following statements:

"Canada has worked, and I personally have worked very hard, but it is now evident to me, evident to Canada, that the European Union is incapable of reaching an agreement even with a country with European values such as Canada, even with a country as nice and as patient as Canada."

"Canada is disappointed and I personally am disappointed, but I think it's impossible. We are returning home. At least I will see my three children tomorrow at our home."

She indicated that she was heading home to Canada – but stayed in Belgium overnight to attend meetings in the morning of October 22.

As at 8:30 AM on October 22, 2016, Canada's Trade Minister Chrystia Freedland correctly stated that "[t]he ball is in Europe's court and it's time for Europe to finish doing its job." Canada is not prepared to reopen the CETA again so that Wallonia can extract further concessions.

Minister Freeland is now on Canadain soil and gave a press conference at 1:45PM on October 24, 2016. Minister Freeland clearly stated that:

"CETA isn't dead";
"the ball is in Europe's court";
"it is entirely up to EU to overcome opposition";
"The problems on the table are European problems";
"For us, it is a good agreement ... we are ready to sign it";
"Today all the Europeans, including the Wallooons, have public accepted that Canada's job is done"; and

Paul Magnette (Wallonia) said "Negotiations with the Canadians are over and we are pleased with the results of the negotiations."

In short, Canada is ready, willing and able to sign the CETA this Thursday (October 27).

Where do we go from here?

First, Thursday is an arbitrary deadline. However, if there is no deadline, there will be no momentum. If there is no momentum, the CETA will stall. An open ended time period will surely result in a flat-lining of CETA.

Second, there is not much that Canada can do while the European Union addresses their internal issues.

Third, if the Thursday deadline passes and CETA flatlines, we might have to wait for the European Court of Justice ("ECJ") decision regarding the EU-Singapore challenge on ISDS (Investor State Dispute Settlement). It is only if local governmetn approval is not required can the CETA be revived.

Fifth, to the extent that Wallonia is worried about a future trade negotiation with the United States, Canada cannot fight that ghost of the future. It is unlikely that President Clinton or President Trump will be able to commence comprehensive negotiations with the EU (especially in light of Brexit) and even less likely that the United States will be the giver in the negotiations. The United States is not going to just sign on to accede to CETA – that will never happen.

It would be very helpful to Canadians if the Walloons clearly articulate the problems that the European Commission must overcome. At this point, there is an understanding that it has something to do with:

  1. agriculture,
  2. the Investment Chapter and the Investor-State Dispute Settlement;
  3. environmental, labour and consumer protection legislation;
  4. hormones in beef; and
  5. a perceived issue with sovereignty.

That being said, it is important for Canada to understand the specific concerns that need to be addressed and whether further clarifications (not concessions) are in Canada's best interests. If Canada determines that further language relating to the Investment Chapter would benefit Canadians, it may possible to offer such clarifications to allow Wallonia to save face. If Canada determines that there are benefits to Canada by addressing additional concerns, why wouldn't we.

Finally, what might hold Canada and the EU back is Article XXIV of GATT, which requires that in any new free trade agreement "the duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) [must be] eliminated on substantially all the trade between the constituent territories in products originating in such territories."

If the EU cannot sign a trade agreement with Canada, it is unlikely that the EU can negotiate any trade agreements. Any future negotiating country will be nervous about these types of last minute obstructions. After all parties put their best offers on the table, after the agreement is negotiated, after the text is translated into all necessary languages, after the language is scrubbed, after further modifications are made, after joint interpretative note is developed, there should not be a reopening of the text. That is not negotiation in good faith. Wallonia should have raised the issues sooner and if they did, the compromise had been reached long ago.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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